Salvey Inc.reported the following results from last year's operations: The company's average operating assets were $3,000,000. At the beginning of this year, the company has a $300,000 investment opportunity that involves sales of $480,000, fixed expenses of $100,800, and a contribution margin ratio of 30% of sales.
If the company pursues the investment opportunity and otherwise performs the same as last year, the combined ROI for the entire company will be closest to:

A) 16.6%
B) 1.3%
C) 18.2%
D) 15.3%

Question

Salvey Inc.reported the following results from last year's operations:

The company's average operating assets were $3,000,000. At the beginning of this year, the company has a $300,000 investment opportunity that involves sales of $480,000, fixed expenses of $100,800, and a contribution margin ratio of 30% of sales.
If the company pursues the investment opportunity and otherwise performs the same as last year, the combined ROI for the entire company will be closest to:

A) 16.6%
B) 1.3%
C) 18.2%
D) 15.3%

Minoti Kapur · Accepted Answer

Final Answer : A, Explanation :    Net operating income = $504,000 + $43,200 = $547,200Average operating assets = $3,000,000 + $300,000 = $3,300,000ROI = Net operating income ÷ Average operating assets = $547,200 ÷ $3,300,000 = 16.6%

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